Waikiki Edition and Turnberry Isle Management Settlements

July 17, 2012

In one of the most contentious hotel management contract disputes in recent memory, Marriott International and the owner of The Modern Honolulu hotel in Waikiki have reached a settlement in their court case over the property, which was formerly the Waikiki Edition. Marriott was ousted as the manager of the Edition on August 28, 2011.

The amount of the payment was not disclosed; however, the bankruptcy court judge had ruled in early June that a reasonable estimate of how much Marriott should be paid for lost management fees and expenses was $20.7 million. Marriott had sought $72 million for what it contended was an unjust breaking of a 30-year management contract.

Also settled recently was the little-publicized takeover of the Turnberry Isle Resort & Spa in the Miami where the owner terminated a “no-cut” hotel management contract with more than 50 years left to run and expelled Fairmont from the property.

Extremely interesting is the fact that unbeknownst to each other and separated by 6,000 miles and a 6 hour time difference, the owners of the Edition Waikiki and the Turnberry Isle Resort both took both control of their hotels at virtually the same moment on Sunday morning, August 28, 2011 — 2 am Honolulu time which is 8:00 am Miami time.

According to Jim Butler of JMBM Global Hospitality Group, the firm that represented the owners of Turnberry Isle, there are many important parts to the Turnberry opinion, but one major theme is summed up in this statement by the Court:

“The notion of requiring a property owner to be forcibly partnered with an operator it does not want to manage its property is inherently problematic and provides support for the general rule that a principal usually has the unrestricted power to revoke an agency.”

According to Butler, the 71-page opinion in the Turnberry decision is destined to become one of the most cited cases in the area of hotel management agreements. Although infallibly grounded on legal precedent — going back hundreds of years in English common law, a landmark U.S. Supreme Court case by Chief Justice John Marshall, and a well-known line of hotel cases – Butler believes it is one of the best-written, most thoroughly researched and comprehensive decisions in the area of hotel management law.

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